THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ERIN BURNETT, HOST: We're on the "Front Line" in Pakistan tonight. Is it a rogue state? We went to Karachi to sit down with a few of the country's young men to find out.

Then Herman Cain's 9-9-9 plan, do the numbers really add up? And the "Bottom Line" on Iraq, over the next two months our troops are coming home but is our commitment there over?

Let's go OUTFRONT.

I'm Erin Burnett. OUTFRONT on a Friday night, the end of the war in Iraq. All American troops will be home by the end of the year. That's 39,000 men and women. There was talk that 5,000 troops might stay next year, but, no. We've got Jessica Yellin at the White House and Chris Lawrence at the Pentagon tonight.

Jessica, I wanted to start with you. This came down to whether our troops would be protected from prosecution in Iraq in part, didn't it?

JESSICA YELLIN, CNN WHITE HOUSE CORRESPONDENT: That's right. The White House, this administration and the Iraqi government had been trying to work out a deal to get American troops some immunity from Iraqi laws so that some could stay behind primarily as trainers and advisers. The Iraqi government did not agree to that and you heard the president then announce today that all U.S. troops would be coming home.

You know now some critics are raising security concerns with all U.S. troops leaving Iraq by year's end, but the president emphasized in his remarks, Erin that he has kept a campaign promise. This was a man who ran vowing to end the war in Iraq in his remarks and he vowed also to refocus America's efforts on taking out terrorists, especially al Qaeda and you heard in his remarks today that he emphasized what he views as his successes there. He is underscoring that he has kept his promises to the American people, a surprisingly political message from the president along with this announcement today -- Erin.

BURNETT: All right, well Jessica, thank you very much. And obviously, the campaign trail, Perry, Romney, Cain, all criticizing the president tonight, our political roundtable are going to weigh in on frankly some pretty scathing criticism there. We want to go to the Pentagon now though and Chris to ask about what Secretary Leon Panetta has had to say tonight. CHRIS LAWRENCE, CNN PENTAGON CORRESPONDENT: Yes, Erin, he's traveling in Asia right now, but he spoke to reporters onboard the plane and he said now the Pentagon has got to turn its attention to establishing a long-term strategic partnership with Iraq. He even suggested that after all of the troops leave at the end of the year that there could be some initial discussions about perhaps bringing military trainers back to Iraq at some point down the line.

I also talked to a top Pentagon official here who said, look, they would have liked to have a standing presence in Iraq, but barring that, they can see perhaps an area where they would take new Iraqi officers, bring them to the United States to maybe have them learn in some of America's war colleges or even conduct a combined training with the Iraqi forces at a third host country -- Erin.

BURNETT: All right, thank you very much, Chris. We'll see whether this really is the end or not. We do know this. It has been a long nine-year any costly war for America. Nearly 4,500 Americans have died for the war since it began in March 2003.

The U.S. has spent more than $700 billion on the Iraq war alone, not including Afghanistan, and the cost of continuing operations there is about $4 billion a month. William Cohen is the former secretary of defense under President Clinton and he joins us tonight.

Mr. Secretary thanks so much for taking the time. It has been a long war and costly in many ways. Lives more important than anything, the American people though have spent a lot of our future money on this war. Did we get what we paid for?

WILLIAM COHEN, FMR. SECRETARY OF DEFENSE: Well that's unclear. What we gave to the Iraqi people was an opportunity to become a democratic country. More like what than they asked Benjamin Franklin at the end of the continental Congress, what have you given us. He said a republic if you can keep it.

And what we have given the Iraqi people is an opportunity to have a democratic government. Can they keep it? Much will depend upon the forces inside the government whether they can reconcile those differences between the Sunni and the Shia, whether Iran is going to play a very heavy role in their future.

All of this is unknown at this point, but frankly, coming back to the present decision, I would like to have seen 30,000 or 40,000 remain for a limited timeframe beyond the end of this year. But if I had to make a choice as to whether they could stay without the protection of the SOFA agreement (INAUDIBLE) agreement.

BURNETT: Immunity.

COHEN: If they had no protection I would take them out as soon as possible.

BURNETT: I want to ask you, though, about this issue of paying because it is -- it is a complicated question, and when I was in Iraq covering the oil industry there was a lot of hesitancy among Iraqis. Not necessarily hate of America, but a real hesitancy to give big oil contracts to American companies whether it was based on animosity or just not wanting to look like they favor American companies and now all of a sudden Iraq is open to business. It is the first or second biggest oil reserves in the world and you're seeing Chinese and Russian oil companies get the majority of the contract. Shouldn't this frustrate Americans?

COHEN: It's very frustrating. As a matter of fact, we've seen this take place elsewhere where we are carrying the heavy load in terms of the military obligation and the loss of life, loss of limb, not to mention the cost of our treasury, and yet we're not getting the share of contracts that we should be getting and this again gets back to the many miscalculations we have made with respect to Iraq, number one, how quickly the war would go, number two, they'd be able to pay their own way with their oil reserves, et cetera.

So a lot of miscalculations over the past nine years and I think there's going to be some great disappointment if the United States doesn't have a greater share of the economic opportunity now that they have a fledgling -- fledglingly (ph), at least, in a delicate and hopefully a democracy that will take route and become much stronger. But right now I think it's still pretty fragile.

BURNETT: All right. Let me ask you about this. You brought up the issue of paying for it and I know obviously that was one of the initial things under the Bush administration. We've been told that this -- that Iraqi oil revenues would pay for the war, obviously not the case. But now, Libya, again there's question coming up. I wanted to show you if I could, sir, some more video.

I'm sure you've seen some of it from yesterday. This is new video we have for viewers tonight. It is equally as disturbing as what you saw last evening on the moments before and after Moammar Gadhafi was killed. There are growing calls now to investigate whether he was executed. Some of the videos and shots do appear to show a close shot right to the side of his ear -- his body now in Misrata, the family trying to say that it should be handed over to observe Islamic burial rites.

What have we really signed up for? The president has tried to make it clear that we didn't break this. It's not our responsibility to fix it, but an unstable Libya where extremists could be running wild, but has a lot of oil, doesn't seem like it's something America can just walk away from?

COHEN: Well not walk away from, but there are many countries who have an interest in seeing a stable Libya. Certainly the British, the French and not to mention the other gulf states who have a lot at stake and they also have a lot of money that they can propose to help stabilize Libya until such time as the Libyan people decide do they want revenge or do they want to have reconciliation.

Do they want to have the rule of law or do they want to have the law of rule that they've had for all these years? They've got to make these decisions and I think fairly quickly because the euphoria is going to disappear quite quickly, and then the question becomes what do we have? We have poverty or do we have an opportunity to make progress and have some prosperity.

So the Libyan people have got to get involved very quickly in this and we can play a role, but it's one where we can try to help build their institutions. But the money's going to come, I think from some of the states very close to Libya itself.

BURNETT: I know you had a long flight today and to come in to talk to us. He flew all the way Tokyo tonight, everyone, so that's how much he wanted to do this. So thanks so much.

Well let's bring in David Gergen now, CNN senior political analyst John Avlon, contributor and senior columnist at "Newsweek" and "The Daily Beast" along with J.C. Watts, former Republican congressman from Oklahoma. OK, thanks to all three of you.

Let me ask you first of all this question of Iraq. Did we -- and this has now spanned two administrations -- did we win?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I think the secretary was right. We don't know yet. What I do think is that President Obama, we have to remember, this -- the promise to get out of Iraq was what ignited his campaign, what led him to the nomination, led him to the presidency, so in effect he's right that he has ended it as he pledged and for many Americans this will be a welcome moment.

For people in the foreign policy arena, for those who study and think about this, for the military, the way we're going out is going to be a great disappointment. You know you just heard Secretary Cohen say not three to 5,000. He thought we ought to keep 30 to 40 --

BURNETT: Thirty to 40,000 --

GERGEN: Yes, which was quite, you know it's quite (INAUDIBLE), shows how much military types really thought we needed to keep a significant presence there and the fact we couldn't negotiate some kind of deal to keep them there with immunity says a lot about the fact that we don't have a relationship even today after all we've done for these people that that government is not doing some of the things that are in their interests and in our interests.

BURNETT: And that's the big frustration, which is where it gets to the contract side, which I've seen, which is after all of this, here we are.

JOHN AVLON, CNN CONTRIBUTOR: And that is because to some extent the Pottery Barn rule was broke.

BURNETT: Yes.

AVLON: The country was broken. There are deep resentments and we're not getting the kind of -- (CROSSTALK)

AVLON: -- frankly appreciation for the liberation of Iraq that some might argue we have, let alone the back end of economics, but President Obama's been able to do this. He first of all was able to depolarize Iraq, which is deeply polarizing at the end of the Obama -- the Bush administration and he's wound down the war --

BURNETT: He's getting everyone on board publicly --

AVLON: More or less -- more or less --

(CROSSTALK)

AVLON: This is no longer the polarizing issue it was towards the end of the Bush administration and he also successfully upped the attacks on al Qaeda, very successfully, not just bin Laden, but leader after leader after leader --

BURNETT: Right.

AVLON: -- and now his multilateral approach in Libya has been largely vindicated, so it's going to be hard for Republicans to play the weak on foreign policy narrative.

BURNETT: J.C., what --

(CROSSTALK)

BURNETT: OK. Go ahead -- yes.

GERGEN: I think it was very bipartisan until today, and the way we're going out has brought a very partisan response. The Republicans are condemning this and the Democrats are saying we ought to do this, yes, it's a risk, but we ought to do it and that's very unfortunate. I think all of us hope we leave with a sense of stability and together.

AVLON: But it's a sovereign nation and we can't determine that.

BURNETT: J.C., let me bring you in here though on what David Gergen just said because it is a partisan issue today. You have Rick Perry. I'm deeply concerned President Obama is putting political expediency ahead of sound military security judgment, Mitt Romney, President Obama's astonishing failure to secure an orderly transition. These are obviously incredibly political statements, but they do show that now all of a sudden Iraq is back on the table in politics.

J.C. WATTS (R), FORMER U.S. REP. FROM OKLAHOMA: Well Iraq was not going to be off the table in a political -- in a presidential election. It would have been an issue on the Republican or the Democrat side. I think the way the president announced it probably a lot of Republicans would take exception to it to say I'm fulfilling a campaign promise. Removing 39,000 troops at the end of the year and going from 39,000 to 150, you know take the politics out of it, was it the right thing to do? Was it the thing to do in terms of maintaining some stability in Iraq and I think you -- all of us objectively would question whether or not going from 39,000 to 150 in a very volatile situation is that the right thing to do? Now, when you consider what Iraq has done in terms of not giving the immunity you know, that comes into question, so trying to take the politics out of it, the right thing to do is try and determine was it the responsible thing to do.

BURNETT: All right. Well we're going to take a pause right there. All three of you are going to be back because we're going to talk about what's OUTFRONT next and that's Herman Cain. He was in Detroit today defending the 9-9-9 plan, actually, made some real news here. We went and ran the numbers, the "Bottom Line".

And then "flash robs" and no, I did not misspeak. Robs are the latest trend in crime. We're going to tell you about it and Senator Jeff Sessions proposed an honest budget act today. Is it truly the truth? We'll be back.

(COMMERCIAL BREAK)

BURNETT: The number tonight, 446,745,562. That is how many hamburger Happy Meals you can buy for $1.51 billion. That was McDonald's net income in the third quarter. Sort of makes you feel like you want a hamburger until you think about it and then you feel sick. OK.

Today -- doesn't it -- all right, today presidential candidate Herman Cain addressed critics of his bold plan. Now the critics, you heard them at the presidential debate earlier this week say that it will raise taxes on most Americans. In a blighted Detroit neighborhood Cain said that Americans under the poverty line would pay a zero rate of income tax, so it would be 9-0-9 and then Mr. Cain said something else.

BURNETT: Now Cain has said his plan will create six million jobs. That is enough to make up the gap in taxes. Now we did the math on how much the government loses in revenue when they cut taxes on individuals to nine percent. On capital gains to zero and the thing is it's in the corporate tax realm that things got hairy and as we were joking today, (INAUDIBLE) Perry, really confusing. Depending what you assume, that's where the plan will succeed or fall flat.

RICH LOWRIE, HERMAN CAIN'S CAMPAIGN ECONOMIC ADVISER: My pleasure, Erin. BURNETT: I wanted to start off with this because I know you've spent a lot of time on this, and we have spent a lot of time and used a lot of people on our economic "Strike Team" to look at this, and I wanted to ask you this overall as to why you're choosing to go into all this detail, because it would seem like, you know I was talking to Ari Fleischer today, maybe it's better to pull a Bill Clinton (INAUDIBLE) we make welfare, but I'll figure it out when I get there or Chris Christie and say I'm going to cut, cut, cut, but I'm not going to tell you what it is until I'm in office and then I'm going to look at it and everyone criticized him for not giving detail but then he did it. What about doing that? Saying you're going to have a bold tax plan but not get yourself boxed into a corner on details.

LOWRIE: We're not boxed in. I think that that's a typical reaction where if you don't release details they're going to come after you for not releasing details. If you do release details they're going to come after you for releasing details. So we're going to stay above that and continue to sell the story to the American people that we need to get Washington out of the middle of the tax code.

We need to prevent them from picking winners and losers. We need to limit their power and influence. And we need to return power back to the people, and if you do that it equates to six million jobs in an expansion by $2 trillion of GDP and after that an increase of wages of 10 percent.

BURNETT: It's interesting, by the way, some of the math we did, one place where you may have underestimated, at least according to some of analysis we've seen, Moody's Economy said if your math is right on how much the economy will grow you'll get 12 million jobs, not six million jobs, which is I'm sure something that makes you smile whether you agree with it or not.

But let me ask you this. You know I talked to some people today on Wall Street about your plan and they said the way you may treat companies may result in a world where companies don't want to issue as much debt and that affects their earnings and that would cause the stock market to drop. I mean there are a lot of potentially unintended consequences here.

LOWRIE: No, that's ridiculous. That's totally ridiculous. If the economy expands by $2 trillion, if we're creating that many jobs, why in the world would the stock market go down? When you look at how we level the playing field between exports and world goods, exports now leave our country with high embedded costs and have to compete in markets with low embedded costs and we're unproductive. The result is companies locate overseas to avoid those embedded costs and the jobs follow.

Under the 9-9-9, products -- exports will not pay the business nine. They'll never see the sales nine. So they'll leave here lean and mean and they'll be able to compete anywhere in the world. We're going to be a magnet for capital. We're going to be the place that companies are going to want to locate to be the most efficient producer to reach world markets. On the import side, imports come in today.

They don't bear hardly any of our tax code and under 9-9-9 the imports are going to come in and be subject to the business nine, the personal nine and the sales nine. So that levels the playing field between them and domestic goods which also pay 9-9-9. So you know the problems we have are really more self-inflicted and it starts with the tax code and if you just level the playing field and allow the private sector to grow, we'll get back to the natural state, which is prosperity.

BURNETT: Do you keep a lot of corporate deductions that they get now whether it's for interest expense or things like that?

LOWRIE: No, no, the only deductions it's going to be essentially gross sales minus purchases from other businesses that are essentially subject to the same tax system. You can expense all capital investment. We're throwing out depreciation schedules and you can deduct exports. That's it. So companies that earn billions of dollars right now and don't pay any tax are going to be the ones that see their tax bills go up the most.

BURNETT: Right, companies though that issue debt that Americans rely on for the interesting content (ph) they can't deduct it. They might not issue the debt. That would affect earnings, right --

BURNETT: All right, so I wanted to ask you this on the details and again, I hear you, you're criticized for not giving them and you're criticized for giving them. Are you going to keep giving more and more and drilling down further and further or is there a point where you're going to say enough is enough.

LOWRIE: No, we've released all this from day one. It's been there for anybody who chose to look at it. And what we find is that some don't look at it all. The Tax Policy Center when they released their study they excluded the entire amount that we had carved aside for poverty exemptions so that they could draw a conclusion that this was going to hurt the poor. All of the detail has been spelled out exactly how much we have carved aside for poverty exemptions and it's been out there all along.

BURNETT: All right, well Mr. Lowery, thank you very much. We appreciate your taking the time.

LOWRIE: Thanks for having me.

BURNETT: All right, so let's talk about how the 9-9-9 or 9-0-9 is really going to pay politically. David Gergen is back with us, senior political analyst, John Avlon and of course J.C. Watts. David Gergen, what do you make of this tough thing? I mean you can obviously go down in the details anywhere here and cause all sorts of problems for the plan, but are they giving too many details or too few?

GERGEN: No, look, this is the centerpiece of Mr. Cain's campaign. This is the most important pledge he's making. He's now risen to the top of the polls in several states, so it's imperative that people try to analyze his plan and we have outside groups, CNN, Tax Policy Institute, we need some other studies of this plan --

BURNETT: Right.

GERGEN: -- to determine what the real effects are otherwise you're buying a pig in a poke and we, you know so it's important that we do that. Now I just hate as a political matter we've been arguing for three years whether we ought to raise taxes on the affluent Americans. This plan lowers taxes on affluent Americans and raises taxes on working people. That is a political nonstarter --

BURNETT: Right. Now he would say -- OK -- now to that point he'd say no, that's not true because they'll pay you know a $500,000 car, you're paying $9,000 in tax and lower income you buy used cars --

(CROSSTALK)

BURNETT: I mean again this is where the details comes in --

GERGEN: The one thing --

BURNETT: Yes.

GERGEN: -- analysis we have said 84 percent of people are going to pay more taxes. Now you know he -- OK, they've clarified it since then, but I think they've got a real problem with this plan.

BURNETT: What do you think, John?

AVLON: Look, I mean this is a problem with bumper sticker policy, because the devil is in the details --

BURNETT: That's right.

AVLON: -- when rhetoric meets the real world. He deserves a lot of credit for putting forward a big idea --

BURNETT: That's right.

AVLON: -- and maybe that starts a larger conversation. Rick Perry's flat tax is definitely a response to 9-9-9. Some of the clarifications today made it less regressive and he almost has put forward sort of a pro-growth anti-poverty agenda with some of those empowerment zones, but there are not a lot of details and when it actually gets (INAUDIBLE) how the markets work in reality in a globalized market bigger problems --

BURNETT: That's why things like this --

AVLON: That's right.

BURNETT: -- interest deductions is a big issue here that feeds all the way through the 401(k). It doesn't mean it's not worth it, but I mean there are -- there are repercussions. The devil is in the details.

J.C. Watts, what do you think? Are they -- Herman Cain making a good case? Because I will say this, you know he took a big hit in the debate this week in terms of people picking on him, but that did not affect him in the polls where he's still doing well.

WATTS: You know the bottom line is this. We've got a tax code that penalizes savings, penalizes investment and penalizes productivity and God bless Herman Cain for I think starting a national discussion or notching up a national discussion about a tax code that's very, very warped. You know, we don't need more taxes. We need more taxpayers, and I think the fact that Herman Cain has put this out there, and I think actually in some sense, he has won because now as David said or one of our panelists said here, now Rick Perry's talking about it and you mark my word, Rick Perry won't be the last candidate from the Republican side that proposes some type of new tax system because I think most Americans understand that it's very convoluted and it does all of the wrong things in trying to create productive human behavior and wealth. And so Herman has put it out there. He's prepared to defend it. Rich came on just earlier, five minutes ago to defend it, and I think that's what you have to do in politics. Put the big ideas out there and let's have a discussion about them and as was said, he's leading in the polls.

BURNETT: Right. Yes. I just wonder, David, before we go, though, you know (INAUDIBLE) this conversation with Ari Fleischer today. It's great you put a big idea out. It's great if it sparks a conversation and changes it, but if you actually want to win, there's a line between detail and giving a vision and where to draw that line is a big question --

GERGEN: Absolutely, but if this is the heart and soul of your campaign you better be prepared to defend it down to the details.

BURNETT: Yes, maybe we got some other promise in the campaign --

(LAUGHTER)

BURNETT: All right. Well, thanks to David, to John, J.C., great to see you as always and have a great weekend.

Still OUTFRONT, a new study says American music is more about advertising than entertainment. We cannot resist telling you about this because well there's something special in there.

And then Senator Jeff Sessions introduced what he calls not his budget act, to cut needless federal spending. We ran the numbers.

And disturbing new developments in the baby Lisa case, what the police found when they sent dogs into the family's home today.

(COMMERCIAL BREAK)

BURNETT: And now a story we can't resist. According to a new study on youth addiction, for every hour American teens listen to hip- hop they hear more than three references to brand name alcohol. Now the study analyzed 793 to be exact of the most popular hip-hop songs from 2005 to 2007 and it found that many of the songs seemed more like advertising than entertainment.

Well, it's a pretty interesting study. So, we decided to check the top 30 songs in the Billboard rap charts for ours and this is what we found -- there are a lot of references to brand names, but vehicles and other products actually seem to have surpassed liquor -- vehicles.

And we noticed something else, too. It is probably not fair to single out rap music as the only advertising offender because this is what we found when we checked the top 30 songs on the country charts. Vehicles are at the bottom, but liquor other and products, mostly jeans and power tools, yes, are at the top!

Now the liquor brands mentioned in the rap songs say they are not actively markets to children, but they retroactively reward the artists with endorsements when the songs are successful. That is why many groups have suggested these corporations can't be trusted to police themselves and they've asked the government and the media, us, to intervene on their behalf. That might not be such a good idea and we cannot resist showing you why.

(VIDEO CLIP PLAYS)

BURNETT: We just couldn't resist.

Still OUTFRONT, the OUTFRONT 5.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This is a tragedy for the animal world is what it is. It could have been a bigger tragedy for the human world.

(END VIDEO CLIP)

BURNETT: Flooding in Thailand.

(BEGIN VIDEO CLIP)

REPORTER: Just 24 hours ago, this neighborhood wasn't flooded.

(END VIDEO CLIP)

BURNETT: Pakistan's new generation.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We are not terrorists, and we really aren't. I mean, we don't like guns. None of us like guns.

(END VIDEO CLIP)

BURNETT: All of this OUTFRONT in our second half.

(COMMERCIAL BREAK)

BURNETT: We start the second half of hour of our show with stories we care about, where we focus on our own reporting, do the work, and find the OUTFRONT 5.

Number one: Herman Cain, the presidential candidate clarified details of his plan this morning in Detroit. For example, 9-0-9, no income tax for those under the poverty line.

Earlier this hour, OUTFRONT spoke to the creator of the tax plan, senior economic adviser to Herman Cain, Rich Lowery, dismissed critics, saying it will raise -- who say it will raise taxes on the poor, causing stock market to drop, he says it won't.

Number two: strong earnings powering stocks higher. Dow up four weeks in a row, 267 in the green today. It's all waiting for the European debt meeting on Sunday. Jim O'Sullivan of MF Global says the mood in the markets has been less negative. There is a lot of hope about that and also about the earnings reports out there.

Number three, a crackdown on exotic animals in Ohio after the owner of lions, bears and tigers set them free in Zanesville, Ohio, before killing himself earlier this week. Ohio Governor John Kasich says he'll use current laws to shut down exotic animal auctions. The state will also review all wild animal permits.

We spoke to Kenny Hetrick, the owner of Tiger Ridge Exotics, who came OUTFRONT on a Wednesday. He said the governor's crackdown, quote, "What the governor did had to be done. You have to make people do the right thing because they won't do it on their own. It only takes a few people to screw it up for everybody." It would be a message to those libertarians out there.

Number four: there's one sitting next to me. A warning to store owners about growing trends, flash robs. Groups of people organize themselves using texts, tweets and Facebook swarm into stores and steal. It's a growing problem with more incidents reported nationwide.

OUTFRONT spoke to the National Federation of Retailers. They say one in 10 retailers have been victims of multiple-offender crimes. And it has been 77 days since America lost its top credit rating. What are we doing to get it back? Sadly, not enough.

Now, $357 billion may sound like a lot, but we did the math, and the bottom line is: it is really not a lot. It is about 2 percent of the budget over the five-year period. Is this pocket change or the beginning of a big idea?

Senator Jeff Sessions is the ranking Republican on the budget committee, OUTFRONT tonight to break it down for us.

All right. I know you're going to say it's 2 percent, but -- what's the "but"?

SEN. JEFF SESSIONS (R), ALABAMA: Two percent is a lot when you're talking about $3.7 trillion being spent. You know, Olympia Snowe and I, my colleague, we believe that the American people rightly are concerned with the way their money has been managed.

It has not been managed well. We are using accounting gimmicks to spend more than the budget allows. We're not even passing a budget. In fact, we are now 905 days without a budget in the United States of America during the time we've had the greatest deficits we've ever had. Really, 40 cents of every dollar we spend is borrowed and that's just unacceptable and unsustainable.

BURNETT: Now, I hear you -- $367 billion, it is a lot of money in an absolute sense and it's extraneous spending -- I don't think anyone would argue with you it should be cut. But I don't want to get in whether it's extraneous or not. I wanted to ask you this -- because even when you do that, it is 2 percent.

When you look at the deficit -- I'm sorry, the federal budget for 2010, the year that we've got, you're looking at Medicare and Medicaid, Social Security and unemployment benefits and defense at 76 percent of that budget. That's where you've got to cut, isn't it?

SESSIONS: We've got to cut in all areas. We've got to look at every single expenditure, Erin. You're exactly right.

And I've never said this Honest Budget Act would solve my debt crisis. We never pretended that. It's just a beginning of a national commitment that members of Congress need to make to their constituents that they're going to take seriously.

There are responsibilities and when they tell the public they're spending so much, that's how much it is and not more.

BURNETT: Well, quickly, before we go. A lot of people say they want to put those entitlements on the table. But here's the thing -- everyone says they want to put it on the table and but everyone says, well, someone else will come up with it because, you know, people want to get reelected.

So why not just put a plan on ask say, I don't care if I lose my job over this, it's the right thing to do?

SESSIONS: You know, that's been done. A number of people have proposed that. Of course, the Democrats and President Obama has hammered anybody that has seriously proposed that. Congressman Ryan in the House Budget, Republican budget, put out a long-term plan that provided a vision for a form of Medicare and he was accused of everything but throwing old people in the streets.

BURNETT: Right.

SESSIONS: So we've got to be honest about it. You're exactly right. It's necessary that we discuss honestly with the American people the serious financial condition we're in.

We cannot continue. Every expert, Republican and Democrat has told us that.

BURNETT: That is true. Erskine Bowles has said it, more Democrats and Republicans need to step up.

Thank you very, sir. We appreciate it.

SESSIONS: Thank you.

BURNETT: All right.

As part of the debt ceiling, Congress agreed to take up a balance budget agreement by the end of the year. Will it get done? Should it get done?

Nick Gillespie is the editor in chief of Reason.com; Jonathan Prince is the former adviser to the Obama and Clinton administrations.

OK. Great to have both of you with us.

This is -- and you were the libertarian.

(CROSSTALK)

NICK GILLESPIE, REASON.COM: Correct. Let's not make any --

BURNETT: Right.

(CROSSTALK)

JONATHAN PRINCE, FORMER OBAMA ADVISER: The man in black.

GILLESPIE: I don't want to slander anybody.

You know, if the senator had added five or six more things in his proposal might rise to the level of burnt (INAUDIBLE) burns -- I mean, this is a joke. It's hokum. And we need a Senate, particularly the Senate -- but the whole government needs to actually put a budget to vote which they haven't done because they don't want to. We know we're running out the clock on another continuing resolution for fiscal year 2012.

BURNETT: Continuing budget, like a balanced budget amendment.

PRINCE: Well, look, a balanced budget amendment, I call it kind of the congressional cop-out clause to the Constitution. It basically says we can't make the tough choices we need to do, we can't make some common-sense choices, come together and do our job. Every time a budget isn't balance before, in the past, it hasn't been under a constitutional requirement. So, we'll just mandate that we do it.

And if you look at it in the context of, you know, the Republican Party that right now is lockstep opposed to any kind of revenue, even, you know, spending to revenue 10-1. You know, Governor Romney and House Republicans have ruled out even tax hikes on the very wealthy, on millionaires. You know, it's kind of draconian cuts that --

GILLESPIE: I don't think draconian cuts. We're talking about a federal budget that has gone up by 2,000 by 100 percent, or more than 100 percent in nominal dollars. And all I'm saying is that it's not the Republican Party that's against revenue increases. It's economic history that since 1950, total federal revenues have averaged 18 percent of GDP. All attempts to butt that up higher, or even shrink it under certain people, it never gets very far from that for very long.

If we want a balanced budget, we have to start saying, OK, we're going to spend 18 percent of GDP. Maybe 19 percent under some CBO projections and that's it. And then you got to start cutting.

BURNETT: What is wrong with the balanced budget? I mean, just -- forget the politics of it. What is wrong with it?

PRINCE: There's a lots --

(CROSSTALK)

BURNETT: You can make the emergency provision.

PRINCE: In particular, the notion that the government is actor of the last resort for the country, which means that --

BURNETT: But should they be forced to spend what they take?

PRINCE: In a time of terrible recession, or, you know, God forbid, another depression, or a war.

BURNETT: Right.

PRINCE: But you can build that in with the super majority --

(CROSSTALK) PRINCE: That's kind of the point. Why do we need to tinker the Constitution so much more that we got clauses and sub clauses and sub clauses about how an amendment would work. When in Congress could make some tough choices.

If you look at the plan that President Obama presented to Speaker Boehner.

GILLESPIE: The one earlier this year

(CROSSTALK)

PRINCE: Yes, which is more cuts than they got to.

GILLESPIE: No, in 10 years, we would be spending $5.7 trillion as opposed to $3.7 trillion. There is not a single cut in Barack Obama.

PRINCE: You couldn't even get the House Republicans to agree to that.

BURNETT: I'm only going --

GILLESPIE: Why would they? I mean, you're talking about increasing spending and under Paul Ryan's plan it would go to $4.7 trillion. So, neither of these people are at all legitimate when they're talking about cutting any spending whatsoever and that's on top of a decade of increasing spending.

BURNETT: I knew a libertarian would come out.

GILLESPIE: This is a joke. We need a budget and a balanced budget.

BURNETT: OK.

GILLESPIE: What we really need, though, is a new Senate and a new Congress and a new president.

BURNETT: Not many people on either side would actually probably disagree with the Congress part of that.

All right. Thanks very much to both of you. Appreciate it. We'll have you back.

GILLESPIE: You're welcome.

BURNETT: And now, let's check in with Anderson. What do you go, Anderson?

ANDERSON COOPER, HOST, "ANDERSON COOPER 360": Erin, tonight, keeping them honest on "360." As you know, surprised announcement today from the president that nearly all of the American troops will be out of Iraq by the end of the year. But it's what he didn't say that raises questions. He said nothing about the deal the administration was trying to cut with Iraq that would have kept troops there longer. We're keeping them honest.

Plus, new details about Apple co-founder Steve Jobs' very private battle with cancer. Biographer Walter Isaacson telling "60 Minutes" how Jobs regretted his decision to try alternative methods to battle his cancer early on. We'll talk to Dr. Sanjay Gupta who spoke who talked to some of Jobs' doctors. He joins us tonight.

And what some are calling black market babies sold to the highest bidder with surrogate moms used as pawns. It's a fascinating story revealed in "Crime and Punishment" tonight.

Plus, we'll have the latest out of Libya and the death of Moammar Gadhafi.

And as always, tonight's ridiculous at the top of the hour -- Erin.

BURNETT: Thank you very much, Anderson.

Next, the latest on the baby Lisa case. Police using dogs in their home tonight.

And the new Pakistan -- young men come OUTFRONT.

(COMMERCIAL BREAK)

BURNETT: We do this at the same time every night, our "Outer Circle." We reach out to sources around the world.

And tonight, we go to Thailand where floodwaters are pouring into Bangkok.

Paula Hancocks is there.

Paula, 320 people dead so far, $2 billion in damage -- how is the government handling this?

PAULA HANCOCKS, CNN CORRESPONDENT: Erin, the government has told all residents of central Bangkok to start moving their possessions to higher ground, clearly showing that the threat of the business district flooding has not passed yet. There are more suburbs across Bangkok are starting to be flooded. This is as the government is opening up more flood gates and opening up canals trying to ease the pressure of this immense amount of water against the defenses of the inner city.

But the misery is spreading. At this point, more than 9 million people across the country are the being affected -- Erin.

BURNETT: All right. Thank you very much, Paula.

And new developments tonight in the search for the missing 11- month-old baby in Missouri. Police affidavit released today says a cadaver dog searching for evidence of Lisa Irwin indicated a positive hit for the scent of a body next to her mother's body. The search was conducted Wednesday. Police left the home with blankets and toys. As you can see there, baby Lisa's parents reported her missing on October 4th. Her father said he returned home to discover the lights on, a tampered window and a missing baby. Her mother has denied any involvement at all.

Sandra Endo is in Kansas City, Missouri, joins us tonight.

Sandra, full day of a search. How reliable are these dogs when they say they picked up the scent?

SANDRA ENDO, CNN CORRESPONDENT: Well, Erin, cadaver dogs could be 100 percent accurate depending on how they're trained and handled. But obviously, a hit is important in this investigation.

And I just want to show you the scene right now outside of baby Lisa Irwin's house. The grandparents of the baby is holding a prayer vigil right now. And evidently, we haven't been hearing much from the family as of late, but we have gotten comment just moments ago from the family's private investigator regarding the affidavit, saying the facts are interesting and he hopes the facts will lead to baby Lisa -- Erin.

BURNETT: All right. Tank you very much, Sandra. We'll keep following that story.

Next, we sit down with a few of Pakistan's young men.

(BEGIN VIDEO CLIP)

BURNETT: Survey says the Pakistanis hate America. But is it true?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

BURNETT: Unrest in the Middle East is raising fears of violent extremism there. Before our launch, we traveled to a gaming lounge in Karachi and spoke with three young men who drive through gang war zones to play the video game "World of War Craft III."

Muhammad, Washir and Assan talked about why America has a 16 percent approval rating in Pakistan.

(BEGIN VIDEOTAPE)

BURNETT: Why do you think the numbers are so low, Muhammad? Is it because of drone attacks? Is it that simple?

UNIDENTIFIED MALE: Yes, there was a lot of anti-Americanism built in our society because of unfortunate incidents like drone attacks and even before that, they weren't just agreed to Pakistan's government allying with U.S. on the war on terror because of their own reasons. BURNETT: Do you think when it comes to Osama bin Laden, from your perspective, that the U.S. made a mistake in how they handled that and not working more directly with the Pakistanis and in questioning the sovereignty?

UNIDENTIFIED MALE: Well, I guess, I mean, if you're talking about the U.S. coming here and doing an entire military operation over here, yes, it would be nice if they had spoken to somebody, they could have come out on television there, the U.S. government and said, OK, sorry, Pakistan, I know we did this, but we had to. And people would understand.

UNIDENTIFIED MALE: Relative point to that is that civilians die in drone attacks. That is a very big attack. That civilian could have been me, could have been either one of us.

BURNETT: So, what could Pakistan do? Because in the U.S., there is a perception that Pakistan is not just a victim of terrorism, which I think Americans know and acknowledge, but also a perpetrator of terrorism? What do you think of that?

UNIDENTIFIED MALE: We're again, we have no say in stopping that. We are not terrorists and we really aren't. I mean, we don't like guns. None of us like guns.

BURNETT: Have you guys read this book "The Reluctant Fundamentalist," any of you? So, it's a pretty interesting book and it got short list (INAUDIBLE) in the "New York Times" best seller. So, lots of people in the U.S. read it.

And there was a quote when I read it sort of stuck with me. It's about a young man who studies at Princeton, has an American girlfriend, eventually becomes an extremist, but he gets a job at McKenzie or something like that. And he's in Manila for his assignment on 9/11.

And he writes, "The following evening was supposed to be our last in Manila. I was in my room packing my things. I turned on the TV and saw what I thought was to be a film. But as I continue to watch, I realize it was not fiction but news. I stared as one -- and then the other -- of the Twin Towers of the New York's World Trade Center collapsed. And then I smiled. Yes, despicable my initial reaction was to be remarkably pleased."

At that moment by thoughts were not with the victims, I was caught in the symbolism of it all, the fact that someone had so visibly brought America to her knees.

UNIDENTIFIED MALE: America is the global police like captain America. He symbolizes - what for Pakistani, he symbolizes the American people and symbol of hope, liberty, whatever.

UNIDENTIFIED MALE: (INAUDIBLE) a lunatic. We did not have this sentiment in any way at all. I'm talking about the real nation that Pakistan is, not those minorities that were happy and this sentiment.

BURNETT: What would happen do you think if America just disengaged from Pakistan?

UNIDENTIFIED MALE: It would not be that good because right now, economically, Pakistan is very, very shaky.

UNIDENTIFIED MALE: I mean, it's a difference between bad and worse.

BURNETT: Do you guys still think America is a better partner than China?

UNIDENTIFIED MALE: I think China has actually been more loyal, more helpful.

BURNETT: What is it about China, what did they do well? Was it that makes -- when I said China, you all nod and look kind of clearly pleased?

UNIDENTIFIED MALE: Again, it's also propaganda. We follow a lot of Chinese products and a lot of like -- we've got fighter jets that have been made by them.

The worst thing America ever did to Pakistan was after the nuclear bomb that we (INAUDIBLE) and the sanctions that they put on us. The economic sanctions that were put on us because of that were hard. They were really hard.

And China, I don't see China ever doing that.

BURNETT: So you all have lived here your whole lives? You haven't been to the U.S., but I'm wondering whether you're going to stay.

UNIDENTIFIED MALE: I want to leave. I'm actually planning to leave by the end of this year, but not too far, maybe the Middle East.

UNIDENTIFIED MALE: I don't want to leave but my parents are concerned about me and my life. So, because of their concern, I would want to shift maybe to U.S., U.K. I just want a good opportunity and a good life.

UNIDENTIFIED MALE: I want to stay here.

BURNETT: If you guys leave, it gets one step closer to being a rogue state.

UNIDENTIFIED MALE: But what do we do? How do we provide for our safety? Do we also carry guns? Do we also roam around with an AK-47 on our back because you don't know if the guy in front of you wants to blow up?

(END VIDEO CLIP)

BURNETT: I asked the kids about one other issue, that's that more than 95 percent of Pakistanis don't pay taxes. They said they pay more than any politician. That's something pretty amazing and scary lesson for countries like Greece and for all of us -- paying taxes isn't necessarily a bad thing.